Affinity FCU's Expanding Portfolio Books 50% Growth

As is the case in many other states, small businesses continue to feel the freeze in New Jersey as their lines of credit and credit card balances have been slashed despite their ability to meet their obligations.

The $1.9 billion Affinity Federal Credit Union in Basking Ridge, N.J., has seen the effects of the fallout over the last 24 months, experiencing a steady flow of requests for relief, especially with lines of credit extensions, said Donna Kidd, assistant vice president of commercial lending.

"Unfortunately, the economy stinks right now. If someone is doing their best, we need to work with them so when the economy does turn around, the sun is shining and the snow has melted, they'll continue to work with us," Kidd said.

Affinity has made several adjustments to its commercial lending division to keep up with the demand, including hiring more staff. Affinity's seven-person lending division now boasts four full-time loan officers. Kidd, a former banker, was hired in November 2010 in a newly created position.

"Donna's position was created to more aggressively capture market share among the New Jersey business community by highlighting Affinity's competitive products, consultative service, and the ability to execute more complicated deals for bigger dollars," said Robert Birkhahn, Affinity's executive vice president and chief member relationship officer who oversaw the development of the credit union's commercial lending division in 2005.

Affinity has an extensive line of lending products including commercial real estate loans, owner-
occupied and investment properties, short-term working capital lines of credit, term debt for equipment purchases, renovations, letters of credit, SBA 504 loans and express loans and corporate business Visa credit cards. Kidd said the credit union's $131 million business lending portfolio is still in its infancy.

One of Affinity's approaches for growth is to not follow the cold calling method but to sit down, talk and look at financial statements to see if there might be a need for a corporate credit card or determine if lease payments may be too high. The division's staff works closely with CPAs so that everyone can be on the same page.

"CPAs know their members' business better than anyone else. They can give us insight. It's all about networking," Kidd said.

Those connections are in line with Affinity's goal to grow its commercial lending portfolio by 50% this year. That means helping members find out how they can cut expenses, bringing on merchant services, and providing car, medical and property insurance as well as investment services. In the case of excess cash, it means helping them protect their assets.

Kidd said she has noticed a need for capital expenditures for things like computer system upgrades. It is critical to ensure that the financing matches the type of asset being purchased, she added. Account receivables can be stretched out 60 to 90 days. Because clients have been slower to make payments, small business owners are also applying for lines of credit to tide them over. Some members with existing lines are being approved for modifications to knock down the principal.

In certain areas of New Jersey, it's a buyer's market, Kidd said. It may make more sense for someone who is renting space to make the move to buy their own piece of real estate. This is especially true if a member is renting space and is leasing another for warehousing. Due diligence is always the order of the day, she emphasized. The capital has to be in a place to allow such deals to be approved.

A top banking official with the Federal Reserve Board recently lamented on the CRE woes that are likely to remain long after the recession's recovery. Kidd agreed, saying that real estate values continue to decrease.

"I don't see it turning around anytime soon," she offered. "But history repeats itself. There has to be an adjustment."

The advantage for Affinity is that banks like Citibank, Chase and Bank of America are scaling back their CRE lending. Most of the competition is coming from regional and community banks. There is still a perception that credit unions are known mostly for personal loans and credit cards, Kidd said. Backed by a staff with strong commercial lending backgrounds, she is hoping to offer another choice for small businesses looking for someone who can serve in an advisory role and find the products to fit their needs.

"We want to get out there and meet members, kick the tires," Kidd said. "A lot of our growth will be organic. What's going to set us apart is we form partnerships. We're not here to shove products down a member's throat."